Building a Manufacturing Powerhouse: India's Blueprint for 25% GDP Contribution

The Indian manufacturing industry currently contributes approximately 17% to the nation's GDP and is poised to be among the fastest-growing sectors. With the potential to reach 920 bln EUR (1 trln USD) by 2025-26, manufacturing is becoming a cornerstone of India's economic growth, driven by key industries such as automotive, engineering, chemicals, pharmaceuticals, and consumer durables. India is on track to become a significant global manufacturing hub, aiming to export around 20% of its GDP by 2030.

The growth is driven by key factors including:

Vision Viksit Bharat@2047: Prime Minister Narendra Modi’s ambitious plan aims to transform India into a 28 trln EUR (30 trln USD) developed economy by 2047. This vision includes raising the manufacturing sector’s GDP contribution to 25% and parallelly reducing logistics costs to match those of developed economies.
Production Linked Incentive (PLI) Schemes: To achieve the goal of ‘Aatmanirbhar’ (self-reliant) India, the government has announced PLI schemes for 14 key sectors with a budget of €22 billion. These initiatives are designed to enhance local manufacturing capabilities and exports from both local and international players manufacturing in India; having already attracted investments of over 11 billion EUR by the end of 2023 and disbursed 486 million EUR in incentives. The recent FY 2025 budget further expanded the PLI scheme to 16 sectors and increased allocations for some key sectors with the sole purpose of domestic production to reduce import dependency.
National Manufacturing Policy: Introduced to increase the manufacturing sector's share of GDP to at least 25%, this policy aims to enhance global competitiveness, domestic value addition, technological depth, and environmental sustainability of growth. It facilitates a push towards increased global competitiveness of Indian manufacturing
Industrial Internet of Things (IIoT) and Industry 4.0: The fourth industrial revolution promises to enhance manufacturing automation globally by integrating cyber-physical systems and AI, enabling customized and flexible mass production technologies. This is especially relevant for India where companies are increasingly adopting automation as the cost advantage of labor diminishes compared to the potential incremental benefits.

The manufacturing industry attracted approximately 43 bln EUR in investment during FY24, and this figure is expected to increase in the coming years. Given the supportive policies and growth drivers, India is on track to achieve the target of 25% manufacturing GDP contribution and become a global manufacturing powerhouse.

Despite these growth drivers, India's manufacturing sector faces significant challenges, including infrastructure deficiencies, regulatory hurdles, and skill gaps. Addressing these issues is crucial for achieving the government's ambitious targets.

As a result, the manufacturing sector's contribution to India's economy remains comparatively lower than economies like China (31%) which has stagnated between 13-17% for over two decades.

How EAC can help

For businesses aiming to enter or expand in India's growing manufacturing industry, EAC can provide quantitative cost analyses of production and manufacturing, comparing total cost of ownership across different businesses. Leveraging its experience with Indian standard authorities, EAC ensures regulatory transparency at the product level. To address the skill gap challenge, EAC can assess tailored training needs, facilitate workshops, and ensure effective knowledge transfer. To partner with EAC for insightful discussions, contact our team members Vikas Gorantala, Ketan Jadhav and Rituraj Shailendra.